What changed in this filing

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Item 9A. Controls and Procedures

2023-03-03 compared with 2022-03-09 · 151 added, 210 removed, 732 unchanged (33% of the section changed)

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DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information required by this Item 10 will be included in our 2022 Proxy Statement and is incorporated herein by reference.

The information required by this Item 10 will be included under the headers “Proposal 1 - Election of Directors,” “Executive Officers” and “Information Regarding the Board of Directors and Corporate Governance” in our 2023 Proxy Statement and is incorporated herein by reference.

We have adopted a written Code of Business Conduct and Ethics, or the Code of Conduct, applicable to all of our employees, executive officers and directors, including our principal executive officer, principal financial officer and principal accounting officer.

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EXECUTIVE COMPENSATION

The information required by this Item 11 will be included in our 2022 Proxy Statement and is incorporated herein by reference.

The information required by this Item 11 will be included under the header “Executive Compensation” in our 2023 Proxy Statement and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 will be included in our 2022 Proxy Statement and is incorporated herein by reference.

The information required by this Item 12 will be included under the header “Security Ownership of Certain Beneficial Owners and Management” in our 2023 Proxy Statement and is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item 13 will be included in our 2022 Proxy Statement and is incorporated herein by reference.

The information required by this Item 13 will be included under the header “Transactions with Related Persons” in our 2023 Proxy Statement and is incorporated herein by reference.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 will be included in our 2022 Proxy Statement and is incorporated herein by reference.

The information required by this Item 14 will be included under the header “Proposal 2 - Ratification of Selection of Independent Registered Public Accounting Firm” in our 2023 Proxy Statement and is incorporated herein by reference.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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1 by and between the registrant and Hansoh (Shanghai) Healthtech Co., Ltd., dated as of February 10, 2022.

10-K 001-39264 10.10 March 9, 2022

10.11*# Amendment No.

2, dated as of March 11, 2022, and Amendment No.

3, dated as of December 11, 2022, to License Agreement by and between the registrant and Hansoh (Shanghai) Healthtech Co., Ltd.

10.12 Lease Agreement by and between the registrant and 128 Spring Street Lexington, LLC, dated March 20, 2017, as amended by the First Amendment to Lease Agreement by and between the registrant and 128 Spring Street Lexington, LLC, dated July 1, 2019 and by the Second Amendment to Lease Agreement by and between the registrant and 128 Spring Street Lexington, LLC, dated August 8, 2019.

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10.21+ First Amendment to the Employment Agreement by and between the registrant and Jenn Lachey, dated as of January 1, 2022.

10-K 001-39264 10.20 March 9, 2022

10.22+ First Amendment to the Employment Agreement by and between the registrant and Keith Regnante, dated as of January 1, 2022.

10-K 001-39264 10.21 March 9, 2022

10.23+ First Amendment to the Employment Agreement by and between the registrant and Simon Cooper, dated as of January 1, 2022.

10-K 001-39264 10.22 March 9, 2022

10.24+ Amendment to Offer Letter by and between the registrant and Jennifer Lachey, dated August 1, 2022.

10-Q 001-39264 10.1 November 3, 2022

10.25 Indenture of Lease by and between the registrant and Revolution Labs Owner, LLC, dated September 7, 2021.

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* Filed herewith

** Furnished herewith

** Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in such filing.

+ Indicates management contract or compensatory plan.

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if publicly disclosed.

The agreements and other documents filed as exhibits to this Annual Report on Form 10-K are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose.

In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

FORM 10-K SUMMARY

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We have audited the accompanying consolidated balance sheets of Keros Therapeutics, Inc.

and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, convertible preferred stock and stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, statements of stockholders’ equity and cash flows, for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

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Operating lease liabilities, net of current portion 12,811 231

Other liabilities — 62

Total liabilities 29,358 12,077

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STOCKHOLDERS’ EQUITY:

Preferred stock, par value of $ 0.0001 per share;

10,000,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively;

no shares issued and outstanding

Common stock, par value of $ 0.0001 per share;

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Research and development incentive income 7,081 —

Change in fair value of preferred stock tranche obligation — ( 1,490 )

Other income (expense), net 3,031 ( 356 )

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Loss before income taxes ( 104,679 ) ( 56,733 )

Income tax (provision) benefit ( 2,011 ) 172

Income tax provision — ( 2,011 )

Net loss $ ( 104,679 ) $ ( 58,744 )

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KEROS THERAPEUTICS, INC.

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share data)

CONVERTIBLE PREFERRED STOCK COMMON STOCK

$ 0.0001 PAR VALUE

CAPITAL ACCUMULATED

DEFICIT TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

$ 0.0001 PAR VALUE

VALUE SERIES A-1

$ 0.0001 PAR VALUE

SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT

DEFICIT TOTAL STOCKHOLDERS’ EQUITY

SHARES AMOUNT

BALANCE, January 1, 2021 23,192,866 $ 2 $ 326,730 $ ( 65,011 ) $ 261,721

Issuance of Series C convertible preferred stock, net of issuance costs of $ 227

— — — — — — 4,169,822 55,781 ( 8 ) ( 8 )

Settlement of preferred stock tranche liability — — — — — — — — 6,446 6,446

Conversion of convertible preferred stock upon initial public offering ( 4,607,652 ) ( 9,891 ) ( 368,612 ) ( 944 ) ( 1,579,043 ) ( 9,106 ) ( 4,169,822 ) ( 55,781 ) 10,725,129 1 75,721 75,722

Initial public offering, net of underwriting discounts, commissions and offering costs — — — — — — — — 6,900,000 — 100,123 100,123

Issuance of common stock, net of underwriting discounts, commissions and offering costs of $ 9,390

Issuance of common stock under the ATM agreement, net of commissions and offering cost of $ 475

520,000 — 28,096 — 28,096

Exercise of common stock options 261,968 — 379 — 379

Vesting of restricted stock — — — — — — — — 34,557 — — — —

Stock-based compensation — — 11,722 — 11,722

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Non-cash lease expense 941 520

Changes in fair value of preferred stock tranche obligation — 1,490

Changes in operating assets and liabilities:

Accounts receivable 18,000 ( 18,000 )

Research and development incentive receivable — 922

Prepaid expenses and other current assets ( 3,321 ) ( 1,548 )

Deferred IPO costs — 604

Other assets ( 1,574 ) —

Accounts payable ( 408 ) 1,485

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Proceeds from issuance of common stock, net of offering cost 119,578 28,171

Proceeds from issuance of Series C preferred stock — 56,000

Payment of Series C preferred stock issuance costs — ( 227 )

Proceeds from issuance of common stock, from the initial public offering, net of underwriting discounts of $ 7,728

Payment of initial public offering costs — ( 2,549 )

Proceeds from issuance of common stock, from follow-on financing, net of underwriting discounts of $ 8,970

Payment of follow-on financing offering costs — ( 420 )

Payment of issuance costs ( 87 ) —

Proceeds from exercise of stock options 818 379

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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Settlement of preferred stock tranche obligation $ — $ 6,446

Property and equipment purchases still in accounts payable $ 75 $ 11

Issuance cost still in accrued and accounts payable $ 63 $ 75

Conversion of preferred stock into common stock upon closing of initial public offering $ — $ 75,714

Right-of-use assets obtained in exchange for operating lease obligation $ 15,423 $ —

The following table provides a reconciliation of the cash and cash equivalents and restricted cash as of each of the periods shown above:

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Its principal offices are in Lexington, Massachusetts.

The Company is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel treatments for patients suffering from hematological and musculoskeletal disorders with high unmet medical need.

The Company is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of novel treatments for patients suffering from hematological, pulmonary and cardiovascular disorders with high unmet medical need.

The Company’s lead protein therapeutic product candidate, KER-050, is an engineered ligand trap comprised of a modified ligand-binding domain of the transforming growth factor-beta (“TGF-ß”) receptor known as activin receptor type IIA that is fused to the portion of the human antibody known as the Fc domain.

KER-050 is being developed for the treatment of low blood cell counts (“cytopenias”), including anemia and thrombocytopenia, in patients with myelodysplastic syndromes (“MDS”) and in patients with myelofibrosis.

The Company has initiated a Phase 2 clinical trial in patients with MDS and reported preliminary data from Part 1 of this trial most recently in December 2021.

The Company’s lead small molecule product candidate, KER-047, is designed to selectively and potently inhibit activin receptor-like kinase-2 (“ALK2”), a TGF-ß receptor.

KER-047 is being developed for the treatment of anemia resulting from iron imbalance as a direct consequence of elevated ALK2 signaling, including the Company’s initial target, iron-refractory iron deficiency anemia (“IRIDA”).

In December 2020, the Company reported topline data from its completed Phase 1 clinical trial of KER-047 in healthy volunteers.

The Company’s third product candidate, KER-012, is designed to bind to and inhibit the signaling of TGF-ß ligands that suppress bone growth, including activin A and activin B, to potentially promote bone growth.

KER-012 is being developed for the treatment of pulmonary arterial hypertension (“PAH”) and for the treatment of disorders associated with bone loss, such as osteoporosis and osteogenesis imperfecta.

In September 2021, the Company commenced a Phase 1 clinical trial of KER-012 in healthy volunteers.

KER-047 is being developed for the treatment of functional iron deficiency which is a consequence of elevated ALK2 signaling, including the Company’s initial target, iron-refractory iron deficiency anemia (“IRIDA”).

The Company’s third product candidate, KER-012, is designed to bind to and inhibit the signaling of TGF-ß ligands that stimulate smooth muscle hypertrophy and fibrosis, including activin A, activin B and myostatin (GDF8).

KER-012 is being developed for the treatment of pulmonary arterial hypertension (“PAH”) and for the treatment of cardiovascular disorders.

Since its inception in 2015, the Company has devoted the majority of its resources to business planning, research and development of its product candidates, including conducting clinical trials and preclinical studies, raising capital and recruiting management and technical staff to support these operations.

To date, the Company has not generated any revenue from product sales as none of its product candidates have been approved for commercialization.

In May 2021, the Company filed a registration statement on Form S-3, which was automatically effective upon filing.

Pursuant to this registration statement, the Company may issue up to $ 150.0 million in common stock in sales deemed to be an “at the market offering,” as defined by the Securities Act, and, so long as the Company qualifies as a “well-known seasoned issuer” as defined in Rule 405 of the Securities Act, an unspecified amount of shares of the Company common stock, preferred stock, debt securities and warrants.

In May 2021, the Company filed a registration statement on Form S-3, which was automatically effective upon filing (the “Shelf Registration Statement”).

Pursuant to the Shelf Registration Statement, the Company could issue up to $ 150.0 million in common stock in sales deemed to be an “at the market offering,” as defined by the Securities Act, and, so long as the Company qualifies as a “well-known seasoned issuer” as defined in Rule 405 of the Securities Act, an unspecified amount of shares of the Company common stock, preferred stock, debt securities and warrants.

In December 2022, the Company filed a prospectus supplement to the Shelf Registration Statement for the issuance and sale, if any, of up to an additional $ 250.0 million in common stock in sales deemed to be an “at the market offering,” as defined by the Securities Act.

Liquidity and Capital Resources

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The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent

assets and liabilities as of and during the reporting period.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent assets and liabilities as of and during the reporting period.

The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances.

This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.

may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, useful lives assigned to property and equipment, the fair values of common and preferred stock and the fair value of the preferred stock tranche obligation.

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The money market account is valued using quoted market prices with no valuation adjustments applied and is categorized as Level 1.

The Company had restricted cash of $ 1.3 million and $ 0.1 million in the form of a certificate of deposit related to its operating leases in Lexington, Massachusetts as of December 31, 2021 and 2020, respectively.

The Company had restricted cash in the form of two certificates of deposit related to its two operating leases in Lexington, Massachusetts of $ 1.3 million each as of December 31, 2022 and 2021.

Concentrations of Credit Risk

Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash and cash equivalents.

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents.

The Company may maintain deposits in financial institutions in excess of government insured limits.

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Expenditures for repairs and maintenance are expensed as incurred.

When assets are retired or disposed of, the assets and related accumulated depreciation are derecognized from the accounts, and

any resulting gain or loss is included in the determination of net loss.

When assets are retired or disposed of, the assets and related accumulated depreciation are written off from the accounts, and any

resulting gain or loss is included in the determination of net loss.

Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets as follows:

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Research and Development Incentive

The Australian research and development tax incentive program provides tax offsets to eligible companies that engage in research and development activities and has two core components:

▪ 43.5% refundable tax offset for certain eligible research and development entities with an aggregated turnover of less than $20.0 million per annum;

▪ 38.5% non-refundable tax offset for all other eligible research and development entities.

Unused offset amounts may be able to be carried forward for use in future income years.

The Company is eligible to participate in an Australian research and development tax incentive program under which the Company is eligible to receive a cash refund from the Australian Taxation Office for a percentage of the research and development costs expended by the Company in Australia.

The Company’s estimate of the cash refund it expects to receive related to the Australian research and development tax incentive program is included in other assets in the accompanying consolidated balance sheet and such amounts are recorded as research and development incentive income in the statement of operations.

Research and development incentive income includes payments under the Research and Development Tax Incentive (the “R&D Incentive”) from the Australian government.

The R&D Incentive is one of the key elements of the Australian government’s support for Australia’s innovation system and was developed to assist businesses recover some of the costs of

undertaking research and development.

Since July 1, 2021, the R&D Incentive has provided a non-refundable tax offset up to 16.5% above the Company’s underlying income tax rate, as the Company qualified as an eligible company with an aggregated turnover of more than $20.0 million per annum that engages in research and development activities.

The Company has assessed its research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under the R&D Incentive.

The Company estimates the non-refundable tax offset available to it based on available information at the time.

This estimate is also reviewed by the Company’s external tax advisors on an annual basis.

The Company’s estimate of the cash refund it expects to receive related to the R&D Incentive is included in other assets in the accompanying consolidated balance sheet and such amounts are recorded as research and development incentive income in the statement of operations.

The Company recognizes research and development incentive income when there is reasonable assurance that the income will be received, the relevant expenditure has been incurred, and the consideration can be reliably measured.

The Company has no research and development incentive receivable and other income from Australian research and development incentives of $ 0.0 million and $ 2.5 million for the years ended December 31, 2021 and 2020, respectively, related to refundable research and development incentive income payments in Australia.

The Company has no research and development incentive receivable and has recorded other income from the R&D Incentive of $ 7.1 million for the year ended December 31, 2022 and no income from the R&D Incentive for the year ended December 31, 2021 related to refundable research and development incentive income payments in Australia.

Revenue Recognition

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Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

At the end of each reporting period, the Company re-evaluates the probability of achievement of such development and clinical milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price.

At the end of each reporting period, the Company re-evaluates the probability of achievement of such development and clinical milestones and any related constraint, and if necessary, adjusts

its estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration and other research and development revenue in the period of adjustment.

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The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.

The Company’s singular concentration is focused on the discovery and development of breakthrough therapeutics for hematological and musculoskeletal disorders with high unmet medical need.

Common Stock Valuation

Prior to the Company’s initial public offering (“IPO”) in April 2020, due to the absence of an active market for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid ( Valuation of Privately-Held Company Equity Securities Issued as Compensation ) to estimate the fair value of its common stock.

Prior to the IPO, the fair value of the shares of common stock underlying the stock-based awards were determined by the Company's board of directors (the "Board") with input from management.

Since there was no public market for the common stock prior to April 8, 2020, the Board had determined the fair value of the common stock at the time of grant of the stock-based award by considering a number of objective and subjective factors, including having valuations of the common stock performed by a third-party valuation specialist.

Following the closing of the initial public offering, the fair value of the Company’s common stock is determined based on the quoted market price of the common stock.

Convertible Preferred Stock

The Company has classified convertible preferred stock, referred to as preferred stock, as temporary equity in the accompanying consolidated balance sheet due to terms that allow for redemption of the shares in cash upon certain change in control events that are outside of the Company’s control, including sale or transfer of control of the Company as holders of the preferred stock could cause redemption of the shares in these situations.

Subsequent adjustments of the carrying values to the ultimate redemption values will be made only when it becomes probable that such a liquidation event will occur.

On April 13, 2020, upon the closing of the Company's IPO, all outstanding shares of Preferred Stock converted into 10,725,129 shares of the Company's common stock.

Additionally, effective April 13, 2020, the Company's amended and restated certificate of incorporation authorized the issuance of 10,000,000 shares of preferred stock.

There were no outstanding shares of convertible preferred stock as of December 31, 2021.

The Company’s singular concentration is focused on the discovery and development of breakthrough therapeutics for hematological, pulmonary and cardiovascular disorders with high unmet medical need.

Stock-Based Compensation

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The Company’s potentially dilutive securities, which include stock options, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders

Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The Company excluded the following from the computation of diluted net loss per share attributable to common stockholders as of December 31, 2022 and 2021, because including them would have had an anti-dilutive effect:

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As a result of the continuing global COVID-19 pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business operations, including its preclinical studies and clinical trials, supply chains and third-party providers.

Additionally, in response to ongoing COVID-19 pandemic, the Company closed its principal executive office in March 2020.

Currently, the Company’s administrative employees continue to work outside of the principal executive office, and the Company maintains a limited the number of staff in any given research laboratory.

The Company anticipates that the COVID-19 pandemic will continue to have an impact on the development timelines for several of its preclinical and clinical programs.

The extent to which the COVID-19 pandemic impacts the Company’s business, its clinical development, its regulatory efforts, its corporate development objectives and the value of and market for its common stock will depend on future developments which are highly uncertain and cannot be predicted with confidence at this time, including, without limitation:

the ultimate duration of the pandemic;

travel restrictions;

home quarantine orders;

social distancing and business closure requirements in the United States, Australia, New Zealand and other countries;

and the effectiveness of actions taken globally to mitigate the spread of the COVID-19 virus.

The overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

The extent to which the COVID-19 pandemic impacts the Company’s business, its clinical development and regulatory efforts, its corporate development objectives and the value of and market for its common stock will depend on future developments which are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, particularly in light of variant strains of the COVID-19 virus, travel restrictions, quarantines, social distancing

and business closure requirements in the United States, Australia, New Zealand, Europe, the United Kingdom, South Korea and other countries and the effectiveness of actions taken globally to contain and treat the disease.

The global economic slowdown, manufacturing and supply chain issues, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities.

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The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

Preferred Stock Tranche Obligation

The Company determined that its obligation to issue, and the Company’s investors’ obligation to purchase additional shares of convertible preferred stock at a fixed price (i.e.

the issuance price) in subsequent tranches following the initial closings of the series A, series A-1, and series B-1 convertible preferred stock (respectively, the “Series A Preferred Stock,” “Series A-1 Preferred Stock,” and “Series B-1 Preferred Stock”, which are referred to collectively with the series B-2 convertible preferred stock (the “Series B-2 Preferred Stock”) and the series C convertible preferred stock (the “Series C Preferred Stock”) as the “Preferred Stock”) financings represented a freestanding financial instrument (the “Preferred Stock Tranche Obligation”).

The freestanding financial instrument was classified as a liability on the Company’s consolidated balance sheets and initially recorded at fair value, with changes in fair value for each reporting period recognized in other expense, net in the consolidated statement of operations.

The Board determined it was probable that the Series B-2 Preferred Stock milestone would be met, and the stockholders and the Board subsequently waived the milestone and the issuance of the Series B-2 Preferred Stock on March 2, 2020.

Instead of issuing the Series B-2 Preferred Stock upon this waiver, the Company instead closed its convertible Series C Preferred Stock financing (“Series C financing”).

The associated Preferred Stock Tranche Obligation was remeasured prior to settlement, with the associated $ 1.5 million increase in fair value recorded in the Company’s consolidated statement of operations as other expense, net.

As the Series C financing was executed with related parties, the Company recognized the settlement of the Preferred Stock Tranche Obligation of $ 6.4 million as a capital contribution in additional paid-in capital in the Company’s consolidated balance sheets.

The following reflects the significant quantitative inputs used in the valuation of the Preferred Stock Tranche Obligation:

2020 DECEMBER 31,

Stand-alone Series B-1 Preferred Stock price (spot price) $ 7.28 $ 7.28

Estimated future value of Series B-2 Preferred Stock $ 8.14 $ 8.14

Discount rate 15.50 % 15.50 %

Time to liquidity (years) 0.00 0.16

Probability of tranche closing 100 % 80 %

The purchase price of the Preferred Stock at initial issuance, and all subsequent issuances was higher than the fair value of the Company’s common stock.

The following table sets forth a summary of changes in the fair value of the Company’s Preferred Stock Tranche Obligation for which fair value was determined by Level 3 inputs (in thousands):

PREFERRED STOCK

TRANCHE OBLIGATION

Balance as of January 1, 2019 $ 2,392

Change in fair value 2,564

Balance as of December 31, 2019 4,956

Change in fair value 1,490

Settlement of tranche obligation ( 6,446 )

Balance as of December 31, 2020 $ —

Fluctuations in the fair value of the Company’s Preferred Stock is the primary cause for the significant changes in fair value of the Preferred Stock Tranche Obligation.

In 2020 and 2019, the enterprise value of the Company was determined using the Market Approach, specifically the Subject Company Transaction Method, which considers all share class rights and preferences, as of the date of the most recent financing.

As part of the Company’s strategy, during 2019, the Company began considering the pursuit of longer-term liquidity options including a potential initial public offering, which caused an increase in the value of the Series B-1 Preferred Stock while reducing the value of the Preferred Stock Tranche Obligation.

Subsequently, in March 2020, the Company determined it was probable that the milestone criteria necessary to close the subsequent tranche would be met;

as such, the value of the Preferred Stock Tranche Obligation increased.

The Board then waived the milestone in favor of issuing the Series C Preferred Stock in March 2020 (see Note 8), and in doing so, the Preferred Stock Tranche Obligation was fully settled and reduced to $ 0 on the Company's consolidated balance sheet.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

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Prepaid sales tax 872 255

Prepaid rent 96 —

R&D payroll tax credit — 167

Prepaid insurance 941 993

Prepaid subscriptions 470 130

Interest and dividend receivable 841 —

Other 180 210

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Under the license agreement with MGH (as amended in May 2017 and February 2018, the “MGH Agreement”), the Company obtained an exclusive, worldwide license, with the right to sublicense, under certain patents and technical information of MGH, to make, have made, use, have used, sell, have sold, lease, have leased, import, have imported or otherwise transfer licensed products and processes for use in the treatment, diagnosis, palliation and prevention of diseases and disorders in humans and animals.

The Company is required to use commercially reasonable efforts to develop and commercialize licensed products and processes and must achieve certain required diligence milestones.

The Company is required to use commercially

reasonable efforts to develop and commercialize licensed products and processes and must achieve certain required diligence milestones.

Under the terms of the MGH Agreement, the Company paid an initial license payment of $ 0.1 million in 2016, and reimbursed MGH approximately $ 0.3 million of prior patent prosecution expenses related to the licensed patents in 2017.

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Additionally, the Company is required to pay a low-five digit to mid-five digit annual maintenance fee prior to the first commercial sale of its first product or process, a mid-five digit annual maintenance fee after the first commercial sale of its first product or process that is creditable against royalties, certain clinical and regulatory milestone payments for the first three products or indications to achieve such milestones, which milestone payments are $ 8.6 million in the aggregate, and certain commercial milestone payments for the first three products or indications to achieve such milestones, which milestone payments are $ 18.0 million in the aggregate.

We made payments of $ 50,000 and $ 300,000 in 2020 and 2021, respectively, for the achievement of the clinical and regulatory milestones of (i) filing of an IND in the first country and (ii) the completion of a Phase 1 clinical trial, respectively.

The Company made payments of $ 50,000 and $ 300,000 in 2020 and 2021, respectively, for the achievement of the clinical and regulatory milestones of (i) filing of an IND in the first country and (ii) the completion of a Phase 1 clinical trial, respectively.

The Company is also obligated to pay tiered royalties on net sales of licensed products ranging in the low-single digits to mid-single digits.

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Refer to Note 12, Revenue from Contracts with Customers, for more information regarding this agreement.

CONVERTIBLE PREFERRED STOCK

On March 2, 2020, the Company authorized the sale and issuance of up to 9,049,783 shares of Series C Preferred Stock, par value $ 0.0001 per share, of which 4,169,822 shares were sold at a purchase price of $ 13.43 per share for gross proceeds of

$ 56.0 million.

Issuance costs were approximately $ 0.2 million.

As part of the Company's Series C Preferred Stock issuance, 3,078,968 of the shares were issued to affiliates of members of the Board.

All issued shares reflect the reverse stock split effected March 31, 2020 while the Board authorized shares reflect the original number of shares authorized pre-split.

On April 13, 2020, upon the closing of the Company's IPO, all outstanding shares of Preferred Stock converted into 10,725,129 shares of the Company's common stock.

Additionally, effective April 13, 2020, the Company's amended and restated certificate of incorporation authorized the issuance of 10,000,000 shares of preferred stock.

There were no outstanding shares of Preferred Stock as of December 31, 2021 and 2020.

As of December 31, 2021, the Company’s certificate of incorporation authorized the Company to issue 200,000,000 shares of $ 0.0001 par value common stock.

On April 13, 2020, the Company completed its IPO, in which the Company issued and sold 6,900,000 shares of its common stock, which includes 900,000 shares issued and sold pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $ 16.00 per share, for aggregate gross proceeds of $ 110.4 million.

The Company received approximately $ 100.1 million in net proceeds after deducting underwriting discounts and commissions and offering costs.

In connection with the IPO, all outstanding shares of Preferred Stock automatically converted into 10,725,129 shares of common stock at the applicable conversion ratio then in effect.

In connection with the IPO, the Board and stockholders approved an amended and restated certificate of incorporation to, among other things, effect a one-for-2.1703 reverse stock split of its issued and outstanding shares of common stock and convertible preferred stock, as well as to effect a proportional adjustment to the existing conversion ratios for the Company’s convertible preferred stock.

The reverse stock split was effected on March 31, 2020.

Accordingly, all share and per share amounts of common stock for all periods presented in the accompanying audited consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect this reverse stock split and adjustment of preferred stock conversion ratios.

On November 17, 2020, the Company completed an underwritten public offering in which the Company issued and sold 2,990,000 shares of common stock at a public offering price of $ 50.00 per share, which includes 390,000 shares of common stock issued pursuant to the exercise in full of the over-allotment option by the underwriters.

The aggregate gross proceeds to the Company from the public offering were approximately $ 149.5 million.

The Company received approximately $ 140.1 million in net proceeds after deducting underwriting discounts and commissions and offering costs.

As of December 31, 2022, the Company’s amended and restated certificate of incorporation authorized the Company to issue 200,000,000 shares of common stock at a par value of $ 0.0001 per share.

On May 3, 2021, the Company entered into a Sales Agreement (the “ATM Sales Agreement”) with SVB Securities LLC (formerly SVB Leerink LLC) (“SVB Securities”), as agent, pursuant to which the Company may offer and sell, from time to time, shares of its common stock through SVB Securities (the “ATM Offering”).

On May 3, 2021, the Company filed the Shelf Registration Statement, including a base prospectus and sales agreement prospectus, with the Securities and Exchange Commission (the “SEC”), which became effective immediately upon filing, for the issuance and sale of up to $ 150.0 million of shares of the Company’s common stock under the ATM Sales Agreement.

On December 12, 2022, the Company filed a prospectus supplement to the Shelf Registration Statement for the issuance and sale, if any, of up to an additional $ 250.0 million of shares of its common stock under the ATM Sales Agreement.

For the year ended December 31, 2021, the Company raised gross proceeds of $ 28.6 million pursuant to the ATM Offering through the sale of 520,000 shares of common stock at a weighted average price of $ 55.00 per share.

The net proceeds from the ATM Offering were approximately $ 28.1 million after deducting sales agent commissions of $ 0.4 million and offering expenses of $ 0.1 million.

As of December 31, 2021, the Company was eligible to offer and sell, from time to time, shares of its common stock for an aggregate offering amount of up to the remaining $ 121.4 million available under the ATM Offering.

The net proceeds from the ATM Offering for the year ended December 31, 2021 were approximately $ 28.1 million after deducting sales agent commissions of $ 0.4 million and offering expenses of $ 0.1 million.

For the year ended December 31, 2022, the Company raised gross proceeds of $ 121.4 million pursuant to the ATM Offering through the sale of 3,410,384 shares of common stock at a weighted average price of $ 35.60 per share.

The net proceeds from the ATM Offering for the year ended December 31, 2022 were approximately $ 119.4 million after deducting sales agent commissions of $ 1.8 million and offering expenses of $ 0.2 million.

As of December 31, 2022, the Company was eligible to offer and sell, from time to time, shares of its common stock for an aggregate offering amount of up to $ 250.0 million available under the ATM Offering.

The following is a summary of the rights and privileges of the holders of common stock as of December 31, 2022:

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Total 3,533,169 2,810,684

The Company’s potentially dilutive securities have been excluded from the computation of diluted net loss per share, as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

STOCK-BASED COMPENSATION

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Expected dividend yield 0.00 % 0.00 %

Fair value of underlying common stock $ 31.18 $ 42.29

A summary of option activity during the years ended December 31, 2022 and 2021 is as follows (in thousands except share and per share data):

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Outstanding as of December 31, 2022 3,533,169 $ 30.26 7.77 $ 72,434

Options exercisable as of December 31, 2021 1,223,019 $ 10.48 7.37 $ 9,524

Options vested as of December 31, 2022 1,749,888 $ 19.59 6.93 $ 53,895

Options unvested as of December 31, 2022 1,783,281 $ 40.72

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.

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The unrecognized stock-based compensation expense is estimated to be recognized over a period of 2.51 years.

The total fair value of options vested during the year ended December 31, 2021 was $ 10.1 million.

Shares of Restricted Common Stock

The Company has granted shares of restricted common stock with time-based vesting conditions.

A summary of restricted stock activity under the 2017 Plan during the years ended December 31, 2021 and 2020 is as follows:

YEAR ENDED DECEMBER 31,

Unvested at the beginning of the year — 34,557

Vested or released — ( 34,557 )

Unvested at the end of the year — —

As of December 31, 2021, there was $ 0 of unrecognized stock-based compensation expense related to unvested restricted stock.

The total fair value of restricted stock vested during the year ended December 31, 2020 was not material.

The total fair value of options vested during the years ended December 31, 2022 and 2021 was $ 16.5 million and $ 10.1 million, respectively.

Stock-Based Compensation Expense

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Permanent differences ( 1.4 ) —

Preferred stock tranche obligation remeasurement — ( 0.7 )

Research and development credits 2.5 4.8

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Other ( 3.3 ) ( 0.3 )

Tax credits 3.2 —

Change in valuation allowance ( 24.1 ) ( 30.9 )

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Research and development credits 10,459 6,315

Capitalized research and development expenses 10,822 —

Operating lease liability 3,602 298

Accrueds 1,275 597

Other 4,668 4,319

Intangibles 115 127

Other $ 908 $ 558

Total deferred tax assets $ 64,868 $ 35,728

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Deferred tax liability

Depreciation ( 283 ) ( 249 )

Operating lease right-of-use asset ( 4,218 ) ( 283 )

Net deferred tax assets (liability) $ — $ —

As of December 31, 2022, the Company had U.S.

federal, state and foreign net operating loss carryforwards of $ 85.8 million, $ 90.3 million and $ 16.4 million, respectively.

Of the $ 85.8 million federal net operating losses, $ 0.2 million will expire in 2035 and the remaining $ 85.6 million can be carried forward indefinitely.

The federal and foreign net operating losses can be carried forward indefinitely.

The state net operating loss carryforwards begin to expire in 2039.

federal, state and foreign net operating loss (“NOL”) carryforwards of $ 138.7 million, $ 137.8 million and $ 0 million, respectively.

Of the $ 138.7 million federal NOLs, $ 0.2 million will expire in 2035 and the remaining $ 138.5 million can be carried forward indefinitely.

The previously reported foreign tax loss carryforwards were fully absorbed in 2022.

The state NOL carryforwards expire in 2039.

As of December 31, 2022, the Company had U.S.

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The tax credits begin to expire in 2031.

Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the net operating loss and tax credit carryforwards are subject to review and potential adjustments by the Internal Revenue Services and state tax authorities.

Under Section 382 of the Code (“Section 382”), certain substantial changes in the Company’s ownership, including the sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards or tax credits which could be used annually to offset future taxable income.

As of December 31, 2022, the Company had foreign research and development tax credit carry forward of $ 1.6 million.

Under the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), the NOL and tax credit carryforwards are subject to review and potential adjustments by the Internal Revenue Services and state tax authorities.

Under Section 382 of the Code (“Section 382”), certain substantial changes in the Company’s ownership, including the sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of NOL carryforwards or tax credits which could be used annually to offset future taxable income.

The Company completed an analysis under Section 382 through November 17, 2020 and determined that on April 15, 2016 and April 13, 2020, ownership changes had occurred.

Based on the Company’s analysis, the Company has determined that $ 0.3 million and $ 0.3 million of its federal and state net operating loss carryforwards, respectively, are limited by Section 382 as of December 31, 2021 and have been written off in the current period.

Based on the Company’s analysis, the Company has determined that $ 0.3 million and $ 0.3 million of its federal and state NOL carryforwards, respectively, are limited by Section 382 as of December 31, 2022 and have been written off in the prior period.

The remaining unused carryforwards remain available for future periods.

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In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of research and development credits and net operating losses.

Under the applicable accounting standards, management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets.

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A change in the Company’s valuation allowance was recorded in 2022 and 2021, in the amount of $ 25.2 million and $ 17.5 million, respectively, due primarily to the generation of additional net deferred tax assets.

The Tax Cuts and Jobs Act resulted in significant changes to the treatment of research and developmental (“R&D”) expenditures under Section 174.

For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or incurred in connection with their trade or business.

Specifically, costs for U.S.-based R&D activities must be amortized over five years and costs for foreign R&D activities must be amortized over 15 years – both using a midyear convention.

During the year ended December 31, 2022, the Company capitalized $ 44.3 million of R&D expenses.

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which it operates or does business in.

A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

A tax benefit from an

uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records tax positions as liabilities and adjusts these liabilities when its judgement changes as a result of the evaluation of new information not previously available.

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COMMITMENTS AND CONTINGENCIES

The Company has historically entered into lease arrangements for its facilities and certain equipment.

As of December 31, 2021, the Company had one operating lease with required future payments, related to its real estate.

In applying the transition guidance under ASU No.

2016-02, Leases (Topic 842) (“ASC 842”), early adopted by the Company effective March 1, 2017, the Company determined the classification of its real estate lease to be operating and recorded a ROU asset and lease liability as of the effective date.

Operating Leases

In March 2017, the Company entered into a lease agreement (the “Lexington Lease”) for its headquarters located in Lexington, Massachusetts.

In July and August 2019, the Company entered into the first and second amendment, respectively, to its Lexington Lease to expand the rental space to 10,417 square feet.

In August 2021, the Company entered into a third amendment to its Lexington Lease (the "Third Amendment") to extend the lease term through March 31, 2023 and to further expand the rental space to 15,622 square feet.

Operating lease liabilities are measured based on the present value of future lease payments over the expected remaining lease term.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and are initially equal to their corresponding lease liabilities, subject to certain adjustments such as prepaid lease payments, initial direct costs and lease incentives.

When the rate implicit in the lease is not readily determinable, the Company uses an incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments.

The incremental borrowing rate represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

The Company estimates this rate based on prevailing market conditions, comparable company and credit analyses, the impact of collateralization, and the term of each of the Company’s lease agreements.

In March 2017, the Company entered into a lease agreement (the “99 Hayden Lease”) with 99 Hayden LLC for its prior headquarters located in Lexington, Massachusetts.

In July and August 2019, the Company entered into the first and second amendment, respectively, to its 99 Hayden Lease to expand the rental space to 10,417 square feet.

In August 2021, the Company entered into a third amendment to its 99 Hayden Lease (the "Third Amendment") to extend the lease term through March 31, 2023 and to further expand the rental space to 15,622 square feet.

The lease modification from the Third Amendment resulted in a non-cash increase to the Company's operating lease liabilities and right-of-use assets of $ 0.7 million in the quarter ended September 30, 2021.

As required under the term of the lease agreement as collateral for the facility lease, the Company had restricted cash of $ 0.1 million in the form of a certificate of deposit as of December 31, 2021 and 2020.

The Lexington Lease provides for scheduled annual rent increases throughout the lease term and does not include termination or purchase options.

From time to time, leases may include options to renew the lease after the expiration of the initial lease term.

A renewal period is included in the lease term only when it is reasonably certain that the Company will exercise such renewal options.

As of December 31, 2021, no renewal options existed that the Company believed were reasonably certain of being exercised.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating lease for the years ended December 31, 2021 and 2020 (in thousands):

FOR THE YEARS ENDED DECEMBER 31,

Operating lease cost $ 587 $ 468

Total lease cost

Other information

Operating lease payments $ 587 $ 468

Remaining lease term 1.3 years 1.9 years

Discount rate 7.27 % 8.02 %

The Lexington Lease does not include any variable payments.

As the Lexington Lease does not provide an implicit rate, the Company utilized its incremental borrowing rate based on what it would normally pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments at the commencement date in determining the present value of lease payments.

As of December 31, 2021 and 2020, the Company classified its short-term and long-term operating liabilities as short-term and long-term liabilities on the consolidated balance sheet, respectively.

As of December 31, 2021, future discounted lease payments under all lease arrangements accounted for under ASC 842 were as follows (in thousands):

As required under the term of the 99 Hayden Lease as collateral for the 99 Hayden Lease, the Company had restricted cash of $ 0.1 million in the form of a certificate of deposit as of December 31, 2022 and 2021.

The 99 Hayden Lease provides for scheduled annual rent increases throughout the lease term and does not include termination or purchase options.

As part of the 99 Hayden Lease, the Company is obligated to pay certain variable payments related to its pro rata share of operating costs including taxes, utilities, and insurance premiums.

On September 7, 2021, the Company entered into an indenture of lease (the “1050 Waltham Lease”) with Revolution Labs Owner LLC (the “Landlord”), pursuant to which the Company is leasing approximately 35,662 square feet of office, laboratory and vivarium space located at 1050 Waltham Street, Lexington, Massachusetts (the “Premises”) for its new principal executive office.

In December 2022, the Company received access to a portion of the Premises pertaining to the office and laboratory space (the “Initial Premises”) in order to begin getting it ready for use.

Accordingly, the 1050 Waltham Lease for the Initial Premises, which is considered a distinct lease component, was determined to be classified as an operating lease and the Company recorded an ROU asset of $ 15.4 million and a lease liability of $ 12.9 million on the consolidated balance sheets.

The portion of the Premises pertaining to the vivarium space (the “Vivarium Premises”) was not made available for use by the Landlord as improvement work was still in progress.The Company’s obligation for the payment of base rent for the Premises begins four months after the Landlord reaches substantial completion of all agreed upon improvements to the Premises (the “Rent Commencement Date”), which is currently expected to occur in the first quarter of 2023.

Costs incurred for tenant improvements of $ 0.4 million are recorded as other long term assets on the consolidated balance sheets as they have been incurred prior to the Rent Commencement Date.

Base rent will initially be fixed at $ 0.2 million per month and will increase by approximately 3 % per annum.

In connection with its entry into the 1050 Waltham Lease, the Company has provided the Landlord a letter of credit in the amount of approximately $ 1.2 million, which is recognized as restricted cash within other assets on the consolidated balance sheets.

In accordance with the 1050 Waltham Lease, the Company is obligated to reimburse the Landlord for certain variable costs, including its proportional share of taxes and operating expenses which are not included in the measurement of the 1050 Waltham Lease.

The 1050 Waltham Lease has a non-cancelable term of eight years and four months, measured from the date of completion of all Landlord required

improvements, and therefore, the 1050 Waltham Lease is currently expected to expire on July 31, 2031.

The Company has the option to extend the term of the 1050 Waltham Lease for a period of an additional five years .

As of December 31, 2022, the Company has no reasonable certainty that this option to extend will be exercised.

Total lease costs were $ 1.1 million and $ 0.6 million for the years ended December 31, 2022 and 2021, respectively.

Cash paid for operating leases was $ 0.9 million and $ 0.6 million for the years ended December 31, 2022 and 2021, respectively.

The weighted average remaining lease term is 4.0 years at December 31, 2022.

The weighted average discount rate is 10.0 %.

Maturities of operating lease liabilities at December 31, 2022 are as follows (in thousands):

MATURITY OF LEASE LIABILITY

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Total operating lease liabilities $ 13,266

On September 7, 2021, the Company entered into an indenture of lease (the “1050 Waltham Lease”) with Revolution Labs Owner, LLC (the “Landlord”), pursuant to which the Company will lease approximately 35,662 square feet of office and laboratory space located at 1050 Waltham Street, Lexington, Massachusetts for its new principal executive office.

The 1050 Waltham Lease has not yet commenced as of December 31, 2021 and is therefore not included in the maturity table above.

The term of the 1050 Waltham Lease is currently expected to commence in the fourth quarter of 2022, on the date that the Landlord delivers the premises to the Company, which shall be after the substantial completion of agreed upon improvements to be performed by the Landlord (such date, the "Commencement Date").

This work is not expected to begin until the second quarter of 2022.

The Company’s obligation for the payment of base rent for the premises begins four months after the Commencement Date (the “Rent Commencement Date”) and will initially be fixed at $ 0.2 million per month, which will increase by approximately 3 % per annum.

The Company will be obligated to reimburse the Landlord for certain variable costs, including its proportional share (approximately 20 % of the rentable area of the building) of taxes and operating expenses, as specified in the 1050 Waltham Lease.

The 1050 Waltham Lease has a term of eight years and four months, measured from the Commencement Date.

The Company has the option to extend the term of the 1050 Waltham Lease for a period of an additional five years .

In connection with its entry into the 1050 Waltham Lease and as a security deposit, the Company has provided the Landlord a letter of credit in the amount of approximately $ 1.2 million.

The Landlord has the right to terminate the 1050 Waltham Lease upon customary events of default.

The Company has the right to terminate the 1050 Waltham Lease if (i) the Landlord work on the premises has not commenced on or prior to July 1, 2022 or (ii) the premises are not ready for occupancy within a specified time period after October 21, 2022.

The Vivarium Premises had not yet been made available to the Company as of December 31, 2022, therefore the commitment of $ 2.2 million, undiscounted, associated with this 1050 Waltham Lease component is not included in the table or values above.

This Vivarium Premises component of the 1050 Waltham Lease is currently expected to commence in first half of 2023.

Short-term Leases

The Company enters into short-term leasing arrangements related to storage of clinical trial materials.

The Company has $ 5,089 and $ 36,290 related to rent expense for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, the Company classified its short-term operating lease liabilities within accrued expenses and other current liabilities, as the Company has elected the practical expedient whereby it will not recognize leases with terms of 12 months or less on the balance sheet.

For the year ended December 31, 2022, the Company engaged with a third-party vendor for master cell bank storage for various program trials, as well as extra space for additional storage for the Company’s lab equipment.

The Company incurred $ 23,627 and $ 5,089 related to lease expense for the years ended December 31, 2022 and 2021, respectively.

Legal Proceedings

The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.

In connection with the Lexington Lease entered into in March 2017, the Company received a loan from the landlord of $ 0.2 million related to its tenant improvement allowance, which is recorded as a non-current liability in the Company’s consolidated balance sheets.

The Company is required to repay interest only on the loan of 8.0 % for the first 18 months of the lease and will then repay the full amount plus interest in installments over the remaining 3.5 year term of the lease, which expires in December 2022.

In connection with the 99 Hayden Lease entered into in March 2017, the Company received a loan from the landlord of $ 0.2 million related to its tenant improvement allowance, which is recorded as a non-current liability in the Company’s consolidated balance sheets.

The Company is required to repay interest only on the loan of 8.0 % for the first 18 months of the 99 Hayden Lease and will then repay the full amount plus interest in installments over the remaining 3.5 year term of the 99 Hayden Lease.

This loan expired in December 2022.

The Company made payments totaling $ 65,000 related to the loan in 2022.

Future payments under the Company’s loan obligation as of December 31, 2021, are as follows (in thousands):

Total payments $ 65

Refer to Note 7, License Agreements, for any potential future milestone or royalty payment amounts.

These are not currently probable or estimable.

There is no future payment obligation as of December 31, 2022.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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On June 22, 2021, the Company entered into a license agreement (the "Neurona Agreement") with Neurona.

Under the Neurona Agreement, the Company granted Neurona a non-exclusive license to use LDN-193189, an early-stage research compound, which the Company licenses from a third party, solely as a reagent in connection with the manufacturing of diagnostic and/or therapeutic products to make, have made, use, import, offer for sale and sell products and services arising therefrom, and to make, have made, acquire, transfer, import and export the compound for such use.

therefrom, and to make, have made, acquire, transfer, import and export the compound for such use.

The license excludes Neurona from any rights to use, sell or distribute the compound for any therapeutic or diagnostic purpose.

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In addition, Hansoh will use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize licensed products in any region in the Territory.

Pursuant to the Hansoh Agreement, the Company is due a one-time, $ 20.0 million upfront license payment and will also be eligible to receive up to an aggregate of (i) $ 26.5 million upon the achievement of specified development milestones and (ii) $ 144.0 million upon the achievement of specified net sales thresholds for all licensed products in the Territory.

Pursuant to the Hansoh Agreement, the Company received a net one-time $ 18.0 million upfront license payment and will also be eligible to receive up to an aggregate of (i) $ 26.5 million upon the achievement of specified development milestones and (ii) $ 144.0 million upon the achievement of specified net sales thresholds for all licensed products in the Territory.

If a licensed product is approved for marketing in the Territory, the Company will be entitled to receive royalty payments based on a tiered percentage of annual net sales in each region within the Territory, with such percentage ranging from the low double digit to high teens, subject to specified potential royalty reductions.

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All other promised goods/services were deemed immaterial in the context of the Hansoh Agreement.

The transaction price of the Hansoh Agreement is equal to the full $ 20.0 million, which includes the one-time, non-refundable, non-creditable initial payment.

All potential milestone payments (development and commercial), and royalty payments are

forms of variable consideration that are fully constrained as of the date of the Hansoh Agreement, and therefore, excluded from the transaction price.

The Company allocated 100 % of the transaction price to the single performance obligation.

The Company recognized the upfront fee of $ 20.0 million as revenue and $ 2.0 million in withholding tax on its consolidated statement of operations for the year ended December 31, 2021, and a receivable, net of withholding tax on its consolidated balance sheet as of December 31, 2021.

The Company received the one-time upfront license payment from Hansoh in January 2022.

Under the Hansoh Agreement, Hansoh was obligated to pay a one-time, net $ 18.0 million payment to the Company, which was paid in the first quarter of 2022.

The Company recognized a gross upfront fee of $ 20.0 million as revenue and $ 2.0 million in withholding tax on its consolidated statement of operations for the year ended December 31, 2021, and a receivable, net of withholding tax on its consolidated balance sheet as of December 31, 2021.

The Company will recognize development milestone payments as revenue at the point in time when it is determined that it is probable such milestones will be achieved as all performance obligations will have been satisfied at the point which a milestone might occur (i.e., Hansoh will have assumed all responsibility for the activities under the Hansoh Agreement).

The Company will recognize royalty payments and commercial milestone payments as the associated sales of licensed products are recorded by Hansoh, as they predominantly relate to the license granted with the Hansoh Agreement.

Subsequent Events

In January 2023, the Company entered into a first amendment to the 1050 Waltham Lease (the “Lease Amendment”).

Under the terms of the Lease Amendment, a phased delivery of the Premises by the Landlord was established as follows:

(i) the Landlord will deliver approximately 31,991 square feet of the Premises (the “Phase A Premises”), on or before January 4, 2023 (the “Phase A Premises Commencement Date”) and (ii) the Landlord will deliver the additional approximately 3,671 rentable square feet of vivarium space (the “Phase B Premises”), when the Landlord substantially completes work on the Phase B Premises, which is estimated to be on or before May 1, 2023 (the “Phase B Premises Commencement Date”).

Per the Lease Amendment, the term of the 1050 Waltham Lease will now commence on the Phase A Premises Commencement Date.

The 1050 Waltham Lease has a term of eight years , measured from the Phase A Premises Commencement Date.

The Company’s obligation for the payment of base rent for the Phase A Premises begins on the date which is earlier to occur of (i) eight months following the Phase B Premises Commencement Date or (ii) 11 months following the Phase A Premises Commencement Date (such earlier date, the “Phase A Rent Commencement Date”).

The Company’s obligation for the payment of base rent for the Phase B Premises begins on the date which is eight months following the Phase B Premises Commencement Date (the “Phase B Rent Commencement Date”).

Base rent will initially be fixed at $ 202,085 per month, which will increase by approximately 3 % per annum.

From and after the Phase A Rent Commencement Date and until the occurrence of the Phase B Rent Commencement Date, the Company will be obligated to pay base rent at the per square foot rent for the Phase A Premises only.

Upon the Phase B Rent Commencement Date, the Company will be obligated to pay the base rent for the entirety of the Premises.

The Company will be obligated to pay the Landlord for certain costs, taxes and operating expenses as specified in the Lease Amendment.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures